Recommendation of the Board
After careful consideration, the Board of Directors of DDCU has unanimously approved the transaction whereby DDCU would transfer substantially all of its assets to St. Stanislaus-St. Casmir’s Polish Parishes Credit Union Limited (the “Buyer”) and the Buyer would assume substantially all of DDCU’s liabilities (the “Transaction”) and determined that it is in the best interests of DDCU and its Members. The Board of Directors also unanimously recommended that the Members vote in favour of the special resolution in respect of the Transaction and the special resolution approving the dissolution of DDCU.
The member vote took place during the Annual General and Special Meeting on January 21st, 2025.
Why Partner and Why Now?
It is increasingly challenging for a small credit union such as ours to keep pace with the demands of the rapidly changing financial services industry. The Board believes that long-term viability requires growth to a level DDCU cannot achieve alone. Without a merger partner, DDCU will struggle with regulatory compliance, the adoption of new technologies and may be unable to sustain profitability. After careful consideration, we sought a partner that we believe shares our values and is financially strong. We felt it was important to choose a partner with a demonstrated commitment to personal, business and agricultural business banking and commitment to community.
The Board believes that proceeding with the Transaction will ensure that our local community continues to be served and supported. It is important to us that you will experience the same personal service you have come to appreciate. This collaboration will allow members to receive a wider range of services from a credit union that is positioned to thrive into the future.
DDCU recognized the need to gain an economy of scale to stay relevant and compete in the rapidly changing financial services industry. We are a sound and profitable credit union and believe this is the best time to attract a suitable merger partner. We believe the Transaction is the best way to address the challenges we currently face and build resilience.
Challenges Facing Dundalk District Credit Union
Limited Capacity to Lend
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Due to our level of capital our lending limit is inadequate for many farm and business members.
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Challenges Adopting New Technology
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Additional skills and financial capacity are required to invest in and implement new technologies.
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Human Capital Development
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Given our size, we have difficulty attracting, developing and retaining the talent needed to drive new strategic initiatives.
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Minimal Membership Growth
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We have an ageing membership and struggle to attract new members.
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Rising Cost of Compliance and Risk Management
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The significantly rising costs related to rapidly changing regulatory requirements and managing risks place a significant strain on human resources and on profits.
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Market Differentiation
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We struggle to effectively convey the value of being part of a credit union.
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Benefits to Members of the Transaction
We believe that the Transaction will allow members to take control of their future. The Transaction will address the challenges identified above, and result in a sustainable credit union that is able to improve the offering to DDCU’s members. Enclosed with this material is a Transaction Member Guide prepared by the Buyer. It outlines the benefits of the Transaction, including, amongst other things, increased lending limits for members, availability of tap enabled debit cards, access to thousands of surcharge-free ATMs and access to an array of wealth management services. The factors identified in this Guide were taken into account by the DDCU Board in deciding to recommend the Transaction.
If the Transaction had not approved, DDCU would need to look for another solution to the challenges identified above, and it is not certain that we would be able to find one.
Potential Disadvantages of the Transaction
The Transaction will involve Dundalk becoming part of a larger credit union, which risks a loss of identity. For example, decisions will be made by the Buyer having regard to a broader set of considerations of which Dundalk is just one. That being said, the Buyer has indicated a desire to retain the Dundalk identity and plans to continue to use the Dundalk name.
Similarly, if the Transaction occurs, DDCU will no longer be governed by a local board, which means there will be less local control. However, there will be opportunity in the future for Dundalk members to put their name forward for election to the board of the Buyer.
As well, there may be some temporary inconvenience to members as new services are implemented following the Transaction. However, even without a Transaction, many of these changes would need to occur and we are not well positioned to implement them without the help of a partner.
There may also be some challenges for staff as they adapt to new products and services. However, we believe there will be better opportunities for training and advancement in the larger merged organization.
Information Regarding the Transaction
The Transaction will involve the acquisition and assumption by the Buyer of substantially all of the assets and liabilities of DDCU. After the closing, the business of DDCU would be carried on by the Buyer using the trade name “Dundalk District, Branch of Blue Group Savings”, and the members of DDCU would become members of the merged credit union. The Buyer has received regulatory approval to use the trade name “Dundalk District, Branch of Blue Group Savings” for an initial period ending on, up to and including the day of dissolution of DDCU. The Buyer has informed us that it intends to apply for regulatory approval to be able to use this trade name beyond that.
The Chief Executive Officer of the Financial Services Regulatory Authority of Ontario has approved the Purchase and Assumption Agreement.
Summary of Purchase and Assumption Agreement
The following is a high-level description of certain provisions of the Purchase and Assumption Agreement. This is not a comprehensive summary of all the terms of the agreement.
- The Purchase and Assumption Agreement provides for the purchase by the Buyer of substantially all of the assets of DDCU, including its loans and investment portfolio, and the assumption by the Buyer of substantially all of the liabilities of DDCU, including deposits.
- Continuing employment will be offered by the Buyer to all of the employees of DDCU except for the CEO, who will continue to be involved for a transition period following closing, and one other employee.
- Members of DDCU will be given full membership in the Buyer as part of the Transaction.
- The closing of the Transaction is subject to a number of customary conditions, including that all required regulatory approvals have been obtained and that the members of DDCU have approved the sale.
- Until the closing, DDCU is required to conduct its business in the ordinary course.
Status of DDCU and Membership Shares After Closing
After closing, DDCU will cease carrying on business and will dissolve as soon as is reasonably practicable. Until DDCU is dissolved, it will continue to exist as a non-operating credit union. Following the closing, all DDCU members will be deemed to have requested redemption of their membership shares in DDCU, with the exception of a limited number of members who will remain DDCU members until its dissolution (the “Retained Members”). All DDCU members will be provided with membership shares in the Buyer worth $100.00. For DDCU members whose DDCU membership share are being redeemed, the receipt of these membership shares in the Buyer will be in full satisfaction of their rights to receive payment on redemption of the DDCU membership shares, and they will not receive anything further upon DDCU’s dissolution. For certainty, all DDCU members will cease to be members of DDCU on closing and will become members of the Buyer after closing, with the exception of the Retained Members who will remain members of both DDCU and the Buyer until DDCU’s dissolution. All loans and deposits of DDCU members with DDCU will become loans and deposits with the Buyer after the closing of the Transaction. As a result, there will be continuity of service.
Questions?
We will do our best to answer any questions you have. You are welcome to speak to us in person at Dundalk or submit questions through our website. We will post answers to frequently asked questions on our website to help you understand the Transaction.